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Manthorpe: Hong Kong reviewing moves to hide key corporate data

Fears mount that Beijing is undermining transparency inherited from British rule

Tsing Ma Bridge: Tsing Yi-Ma Wan, Hong Kong, 1,377 metres long.

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After a torrent of worldwide criticism the Hong Kong authorities are reviewing changes in the law that appear aimed at protecting local tycoons and Chinese oligarchs from prying journalists and inquisitive bankers.

The moves contained in amendments to the Companies Ordinance which the administration began pushing through the legislature in December are raising questions about Hong Kong’s much cherished reputation as a leading open and transparent place to do business.

The administration is clearly nervous about losing its reputation for openness, especially as there are continuing concerns both among local people and the international business community in the city that Beijing is slowly but surely undermining the liberties inherited from Hong Kong’s 150 years of British rule.

The head of the Hong Kong civil service, Carrie Lam, said as the storm broke last month that the administration will review the amendments and “listen to public views.”

There is speculation that the changes, which starting next year would delete the identity card numbers and home addresses of directors listed on Hong Kong’s corporate registry, is in response to demands from Beijing.

Several western newspapers have in recent weeks published stories on the massive wealth accumulated by China’s new generation of leaders. Some of the information was acquired from the Hong Kong registry, which is available online.

But there has been a huge backlash against the secrecy move by banks, hedge funds, accountants, lawyers and financial regulators who frequently depend on the Hong Kong registry when dealing with Chinese companies that may be involved in corruption.

The identity card numbers and home address information in the Hong Kong registry is essential because so many people in China have the same name and identifying an individual with absolute certainty is often difficult.

There are only about 450 family names in China and the most common, Wang, is shared by nearly 10 per cent of the country’s 1.3 billion population.

For example, David Webb, a long-established critic of Hong Kong’s financial institutions, said last month there are on the company registry 19 people named Chan Chikeung and 12 people named Chan Waikeung.

Without the Hong Kong identity card number and home addresses identifying an individual is almost impossible.

Many Chinese companies like to be listed in Hong Kong because it gives them access to the protection of the British-style legal system left in place after London ended its colonial rule and returned sovereignty to Beijing in 1997.

Chinese companies also like to have a presence in Hong Kong because it facilitates the laundering of the profits of corruption or simply spiriting money abroad out of reach of the ruling Communist Party.

But many financial institutions around the world have come to depend on the Hong Kong company director listings for essential information when doing business with China, especially for evidence of corruption or fraud.

Banks use the registry before agreeing to manage initial public offerings, and hedge funds and private equity firms use the registry as part of their due diligence before buying company stock.

There have been several cases in China recently where people charged with fraud or corruption have claimed they are being confused with someone of the same name, only to have their deception exposed by the identity card number and home address information in the Hong Kong registry.

Lawyers, auditors, insurance companies, credit companies and accountants also find the registry an invaluable asset for verifying the identity of people they are dealing with.

Journalists also find the registry a great asset. Last week the Hong Kong Journalists Association published a full-page advertisement in several major newspapers calling for the changes in the Companies Ordinance to be revoked.

Over 1,700 Hong Kong journalists signed a petition against the amendments.

The push for secrecy comes when both senior Hong Kong figures and Beijing leaders have been embarrassed by the exposure of their private wealth.

The head of the Hong Kong administration, Leung Chun-ying, recently selected by a Beijing-appointed committee, has seen his popularity plummet after revelations of illegal additions to his mansion home.

Ironically, Leung was only selected for the leadership after Beijing’s preferred candidate, Henry Tang, was found to have built a massive and illegal basement entertainment complex at his house.

More important for Beijing were stories about the wealth of senior Communist Party figures published in United States-based media late last year as the party was ushering in a new generation of leaders. Some of the information came from the Hong Kong company registry.

One story detailed the fortune worth hundreds of millions of dollars acquired by the family of incoming Communist Party leader and China’s next President Xi Jinping while another described a comparable fortune accumulated by the family of departing Premier Wen Jiabao.

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